Last updated: September 24, 2020

The Chancellor announces his Winter Economy plan

ibrahim-rifath-ovynqgd5Dn4-unsplash

Today Chancellor Rishi Sunak announced his plans for over the winter period, to help support businesses in light of the new government restrictions due to be in place for the next 6 months. Below we have outlined the key headlines and takeaways.

NEW JOB SUPPORT SCHEME ANNOUNCED

A new job scheme has been announced, starting 1 November 2020 to replace the current Job retention (“furlough”) scheme which ends 31 October 2020.

All small and medium-sized businesses are eligible, larger businesses must show their turnover has fallen during the pandemic. Employers can use the new scheme even if they have not previously used the furlough scheme.  

The new Government scheme will last for six months to 30 April 2021 and to be eligible employees will need to be working a minimum of 33% of their hours. For the remaining hours not worked the Government and employer will pay one third. of wages each. This means:

  • Employers will continue to pay the wages of staff for the hours they work - but for the hours not worked, the government and the employer will each pay one third of their equivalent salary.
  • Employees who can only go back to work on shorter time will still be paid two thirds of the hours for those hours they can’t work.
  • The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.

By way of an example an employee working 33% of their hours will receive at least 77% of their pay, 22% paid by the Government and 55% paid by their employer (the “worked” 33% plus 22%).

 

SELF-EMPLOYED INCOME SUPPORT SCHEME

The existing self-employed grant (SEISS) will also be extended on the same basis as the job support scheme.

An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 20% of average monthly profits, up to a total of £1,875.

An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.

 

VAT CUT FOR HOSPITALITY SECTOR CONTINUES

The reduction in VAT to 5% for the hospitality and tourism sector will be extended until 31 March 2021.

 

DEFERRAL OF VAT BILLS

Up to half a million businesses who deferred their VAT bills will be given more breathing space through the New Payment Scheme, which gives them the option to pay back in smaller instalments. Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.

 

SELF-ASSESSMENT TAXPAYERS – TIME TO PAY EXTENSION

Approximately 11 million self-assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.

 

BOUNCE BACK LOANS - FLEXIBILITY GIVEN TO PAY BACK AMOUNTS BORROWED

More than a million businesses who took out a Bounce Back Loan will get more repayment time through a new Pay as You Grow flexible repayment system. 

This includes extending the length of the loan from six years to ten, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses. 

The Government also intends to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.

The chancellor also announced an extension in applications for the government’s coronavirus loan schemes until the end of November.

 

KEEP UP TO DATE

We will of course be keeping our client up to date with news as soon as more information becomes available. In the meantime, please appreciate that this information is as new to us as it is to you, and will take some time to process.

Further guidance will be issued in due course. More details can be found here: https://www.gov.uk/government/news/chancellor-outlines-winter-economy-plan

 

 

Expense eBook CTA_1000x600_011519

Read more of Inform's tax blogs

Live page: Accounting advice during business disruption

It's that wonderful time of the year...for fraudsters to pray on taxpayers!

Paying yourself a salary: What are the most tax efficient options for limited company owners?

Four key cashflow issues that could cripple your business (and how to avoid them)...

Topics:

see all

Archives

see all

Latest Tweets